Devastating: HHS abandons part of ObamaCare as fiscally unworkable

posted at 6:27 pm on October 14, 2011 by Allahpundit

A total debacle. And the punchline is, everyone saw it coming — including the Democrats who went ahead and voted anyway to bring this Frankenstein to life.

Congrats to the mad scientists responsible for choosing late Friday afternoon to break the news.

Known as CLASS, the Community Living Assistance Services and Supports program was a longstanding priority of the late Massachusetts Democratic Sen. Edward M. Kennedy.

Although sponsored by the government, it was supposed to function as a self-sustaining voluntary insurance plan, open to working adults regardless of age or health. Workers would pay an affordable monthly premium during their careers, and could collect a modest daily cash benefit of at least $50 if they became disabled later in life. The money could go for services at home, or to help with nursing home bills.

But a central design flaw dogged CLASS. Unless large numbers of healthy people willingly sign up during their working years, soaring premiums driven by the needs of disabled beneficiaries would destabilize it, eventually requiring a taxpayer bailout…

“Despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time,” Sebelius said in a letter to congressional leaders.

Social Security’s Ponzi scheme is sustainable — not forever, but for now — only because it forces new workers to pay in and keep funding benefits for retirees. CLASS tried to build the same pyramid without using compulsion to create that revenue base on the bottom. The result, soon enough, would have been an upside-down pyramid that inevitably toppled over. Look for the left to try to salvage this disaster on that grounds — that it goes to show the absolutely necessity of a mandate if you want to expand health-care coverage. True enough, I suppose. If you want a robust entitlement state, you had better be prepared for a lot of government coercion.

But wait. We haven’t touched on the real disgrace here yet. Philip Klein:

One reason why the Obama administration has been reluctant to officially shut down the program is that it was one of the main accounting gimmicks they used during the health care debate. Because the CLASS Act was supposed to collect five years of premiums before paying out any benefits, the Democrats have been claim $80 billion in short-term surplus from the program as deficit reduction, ignoring the obvious fact that the money would eventually have to pay for benefits. It’s been called a “budget zombie.”

Here’s the detailed HHS report prepared concluding that the CLASS program couldn’t work. One of the fears raised is that if it were implemented and failed, it would be problematic to shut down.

That’s another key lesson to take away about entitlements: If you want to prevent fiscal hemorrhaging later, your only option is stop the program before it’s up and running and the public’s dependency forms. I’m amazed that Sebelius was responsible enough to pull the plug on this now instead of letting it begin and roll on inexorably towards insolvency.

But never mind that. Look again at that $80 billion figure. How did a program so obviously unsustainable that the White House had no choice but to shut it down produce an $80 billion surplus for ObamaCare accounting purposes? Very simply, actually. The Democrats designed the first five years of CLASS to be a “vesting period” in which enrollees would pay into the program but receive no benefits yet. In other words, for the first five years, the program would have been pure profit for the government — and then, when benefits finally kicked in, the hemorrhaging would begin. The reason they did it that way is the same reason they delayed the start of ObamaCare until 2014: They knew that CBO “scores” new legislation based on its first 10 years of operation, so the more they could game the numbers during those first 10 years, the better the “score” for ObamaCare would look while Democrats were trying to sell it to the public. It was a massive accounting fraud designed to make health-care reform seem much less expensive than it really was. According to Klein, CLASS’s phony “savings” accounted for fully $70 billion of ObamaCare’s supposed $143 billion in deficit reduction. According to WaPo, using a slightly different baseline, CLASS accounted for $86 billion in savings. All of that is up in smoke now. Or rather, it was always smoke. Only now is the White House finally acknowledging it.

But even that’s not the real disgrace here. This is the real disgrace, from Andrew Stiles’s post at the Corner written on September 15:

Long after Obamacare was passed and signed into, even prominent supports of the bill acknowledged that the CLASS Act was a financial disaster waiting to happen. Senate Budget Committee chairman Kent Conrad (D., N.D) called it “a Ponzi scheme of the first order, the kind of thing Bernie Madoff would be proud of.” Health and Human Services secretary Kathleen Sebelius admitted it was “totally unsustainable” in its current form. But again, that was after Obamacare had been enacted. In fact, under the new law, HHS has until Oct. 1, 2012 to finalize the program’s requirements, to be imposed through regulation. Because the law (no doubt intentionally) left vague many of the plan’s key provisions, there is currently no way to reliably assess the program or estimate its potential cost.

As the [Republican] investigative report reveals, administration officials had been warning about the program’s long-term sustainability in the months before the law was passed, yet ignored, and in some cases marginalized these concerns as the White House pushed ahead with its landmark legislation. E-mails uncovered by the working group show that such concerns were first raised back in May 2009, nearly a year before Obamacare’s passage, by Medicare chief actuary Richard Foster. “At first glance this proposal doesn’t look workable,” he wrote in an e-mail to other HHS officials. “Due to the limited scope of the insurance coverage, the voluntary CLASS plan would probably not attract many participants other than individuals who already meet the criteria to qualify as beneficiaries.” Even so, Foster estimated that the CLASS program would have to enroll about 234 million people, which is greater than the entire U.S. population aged 20 and above, in order to sustain itself.

They knew all along, just like they knew all along that Solyndra was a bad bet. And yet in both cases they went ahead anyway because their agenda was more important to them than taxpayer money. Take five minutes and read all of Stiles’s post, which goes on and on — and on — from there. See for yourself just how transparent this fraud was, and yet no one on the Democratic side was willing to halt it before the bill passed because their fiction about “bending the cost curve” was too precious to ObamaCare salesmanship. Byron York is reporting that the GOP’s not going to let this rest with Sebelius withdrawing the program but instead will move to repeal CLASS entirely. That’s excellent. Force all the Democrats who rubberstamped this fraud last year to eat it in a highly public vote, and then let them explain to independents why they’ve gone from “this law will save America” to “this law can’t possibly work” in the course of 18 months. Can’t wait.

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